G20 sounds warning on global economy

Source: Exec Digital UK

Date :18/11/2007 18:15:29

The G20 has warned of rising risks to global economic growth and inflation at a meeting in South Africa.

Finance chiefs from the world's 20 biggest economies revealed that China's reluctance to revalue its currency and the devalued dollar have come under the spotlight at the two-day summit of G20 members.

The group agreed volatile and erratic currency movements were unwelcome.

However, the members did not officially state that any specific currencies were problematic.

It called for greater exchange rate flexibility from countries with large current account surpluses.

The thinly veiled reference to China came as the Asian powerhouse has been under increasing pressure from trading partners including the US to allow its tightly controlled yuan to strengthen to correct global trade imbalances.

The G20 said that any slowdown in global economic growth was likely to be modest.

"Its extent and duration remains difficult to predict," said the communique which ended the summit.

"We also agreed that an orderly unwinding of global imbalances, while sustaining global growth, is a shared responsibility," the communiqué said.

The G20 combines developed and emerging economies that represent two-thirds of the world's population, 90 percent of GDP and more than 80 percent of world trade.

Reform

The managing director of the International Monetary Fund, Dominique Strauss-Kahn, pledged substantial progress on developing countries' demands for a bigger voice in the institution.

Richer countries traditionally have more power in the IMF, but Mr Strauss-Kahn said that the G20 had agreed that developing nations should have a stronger voice.

The current system sees the weight of each nation's vote tied to a quota, which is determined by the size of their respective economies, currency reserves and openness to trade and capital flows.

"The fund needs to be reshaped," Mr Strauss-Kahn said.

"Times have changed. Some emerging countries have much more economic influence than they had."

November 18 2007